Countries like China and India have the power to undercut the European Union’s latest move to sanction Russia for its invasion of Ukraine, potentially lessening the impact of one the most significant economic actions the West has taken against Moscow thus far.
The EU on Friday officially agreed to ban imports of most oil from Russia, joining countries, including the U.S., that have vowed to forgo oil from the country.
But experts say the move likely won’t push Russia to economic pariah status, as other countries, including major economies like China and India, will still import its fuels and give the Kremlin an alternate income source.
“We’re expecting the bulk of the volumes that Russia currently exports to be taken by other markets,” said Alan Gelder, vice president of refining, chemicals and oil markets at energy research firm Wood Mackenzie.
“If they’re still able to find buyers for their exports, and they’ll need to negotiate a price, it does mean that they’re getting a steady revenue stream. If the world all said no, it would be quite different, but the world is not saying that,” Gelder added.
Greater incentive?: Patrick De Haan, head of petroleum analysis at GasBuddy, said that China and India are likely to be even more incentivized to buy oil after the European embargo.
Further complicating the matter, De Haan said, is that Russian oil is of a quality that makes it desirable in international markets.
“It’s the heavier oil that distills into more desirable molecules like diesel, which is what Europe is really craving at this point,” he said.
The delay could help Russia, too: Kristine Berzina, head of the geopolitics team at the Alliance for Securing Democracy, said the fact the ban doesn’t go into effect right away could also undermine its efficacy by giving Russia more time to adjust.
She said that alarms in the market may raise oil prices in the near term, giving Russia a benefit as it sells oil for now, and the country will also be able to work with other countries like India that are likely to buy the oil.
“They can negotiate the pricing there and try to adjust for the fact that they’ll have to go to different markets long term,” she said.
Ben Cahill, a senior fellow at the Center for Strategic and International Studies, said that despite the limitations, the EU sanctions are probably the most significant action that the world has taken to date to limit the use of Russian oil.
“This definitely is the most consequential move yet in terms of restricting Russian exports,” he said. “The big question is how much will this knock Russian oil offline and how much will it just redirect Russian oil from Europe to Asia.”
Read more about what could happen here.